Japan Backs Nuclear Business in UK

Government of Japan agreed with United Kingdom on investment to nuclear power generation business led by Hitachi, Ltd. Whole amount of the project rises up to ¥3 trillion. Government of Japan guarantees private finances for the project, which may cause deficit in national budget, if the project fails. As seen in the crisis of Toshiba with huge loss in nuclear power business in United States, new project of Hitachi cannot escape from disastrous risks.

Hitachi bought Horizon Nuclear Power in UK with ¥90 billion in 2012. Horizon has a plan to build two nuclear reactors in Isle of Anglesey, located in the western coast of Great Britain Island. Horizon hopes to start their operation in 2020. Governments of Japan and UK signed on the document for the framework of investment on the project at the end of last year.

Hitachi, Japan and UK will evenly share the investment of ¥45 billion out of whole ¥3 trillion, ¥15 billion for each of three. Investors of Japan are supposed to be Development Bank of Japan or major electric power companies such as Chubu Electric Power Company or Tokyo Electric Power Company.

Japanese government will guarantee ¥1.1 trillion of financing, one half of whole financing with UK, which will be made by Japan Bank of International Cooperation or three megabanks, Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation and Mizuho Bank. An insurance company backed by Japanese government, Nippon Export and Investment Insurance, will guarantee whole amount of Japan’s share. It is unusual for trade insurance to guarantee whole amount of investment in a developed country. Hitachi is going to make final decision on whether it will further promote the project in the summer of 2020.

The original plan of Hitachi was to simply export nuclear reactors. Urged by competition of exporting infrastructure namely with advance of China, Shinzo Abe administration encourages Japanese companies to join the competition in a context of internal economic growth strategy. Nuclear generation business in foreign countries would contribute to maintaining related technology and engineers of Japan after negative environment of nuclear business after the severe accident in First Fukushima Nuclear Power Plant.

But the risk of nuclear business is eventually getting high. The estimation of whole size of the business in UK has swollen from ¥1.5 trillion to ¥3 trillion with volatile moves in foreign exchange. UK government has not determined the price of electricity produced by new reactors. Some Japanese electric power companies have not decided whether they would be joining the investment. Any successful scenario has not been made yet.